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Thank you for visiting my Blog. Not all of us were born in a rich family and we always think about retiring as a CROREPATI. Thinking is one thing, have you done anything to achieve that dream?

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Anand

Wednesday, May 18, 2011

NPS Swavalamban Scheme

There was a query from one of our Blog Readers who wanted to know about the NPS Swavalamban Scheme. Since it is a detailed topic in itself, I thought, it would be more useful if I write a separate article instead of just responding to the comment as a reply comment. So, here we go!!!

What is the Swavalamban Scheme?

The Swavalamban Scheme is a sub-scheme under the NPS Scheme which we covered in great detail in our blog. This scheme is applicable to all citizens of India who are in the unorganized sector & meet the eligibility criteria, who join the NPS in the year 2010-2011. Under this scheme, the Central Government will contribute Rs. 1000 per year to each NPS account opened in the year 2010-2011 and for the next 3 years 2011-12, 2012-13 and 2013-14. To benefit the citizens who opened their accounts in 2009-10, the government has declared that, they will also be entitled to the benefit of the Swavalamban scheme, that is if they meet the eligibility criteria.

What is the Eligibility Criteria?

There are two important criteria:

1. The citizen must belong to the unorganized Sector and
2. The citizen must make a minimum contribution of Rs. 1000 and a maximum contribution of Rs. 12000 per annum for both the Tier 1 and Tier 2 accounts taken together.

Though the second eligibility criterion is very simple, the 1st one is a bit confusing, isn’t it?

What is the Unorganized Sector?

For the purpose of this scheme, a person will be considered as belonging to the unorganised sector if that person:

1. Is not in regular employment of the Central or a state government, or an autonomous body/ public sector undertaking of the Central or state government having employer assisted retirement benefit scheme, or
2. Is not covered by a social security scheme under any of the following laws:
a. Employees’ Provident Fund and miscellaneous Provisions Act, 1952
b. The Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948
c. The Seamen’s Provident Fund Act, 1966
d. The Assam Tea Plantations Provident Fund and Pension Fund Scheme Act, 1955
e. The Jammu and Kashmir Employees’ Provident Fund Act, 1961

So, if you meet the above 2 criteria and are eligible, you can get Rs. 1000/- for 3 years, which is Rs. 3000/- in all as an extra motivation to invest in this scheme.

Who gives this extra money?

Of course, the Government of India gives …

Why is the Government doing this?

Since this scheme is aimed at being a retirement corpus for the citizens of India, the government has to motivate the people to join it and what better motivation than giving some extra money to the common investor?

What if someone doesn’t meet the eligibility criteria but still applies for it?

If someone doesn’t qualify for this benefit but still claims falsely that he/she is eligible and applies for this scheme, the government reserves the right to reclaim the money credited to their account along with interest & any penalties for providing false information.
Hope this covers enough info about the Swavalamban Scheme. If you need any other info, you know what needs to be done…

Thanks for the comments. I will think about an article on fundamental analysis on a company. I dont provide share buy/sell suggestions here because that involves personalized advise and unfortunately because of my primary work career commitments i wont be able to do justice to that activity if i take it up.

Hi Anand, i have a bit confusing query please enlighten me. I had worked for 2 years for a private company where EPF was there.But from last 1 year I am working for a very small company where there is no EPF or pension related stuff. Needless to say My earlier EPF account is already closed. I want to know whether I am eligible to opt for NPS Swavalamban scheme.

In case of individual NPS account, contributions made are eligible for tax exemption under section 80C. But for tax exemption what proof need to be submitted to Income Tax department or to my employer. Please help

You will definitely get a statement that outlines the amount of money invested by you. You can use that for tax purposes

Reg. submission - you can do either way. If your employer collects such investment proof and calculates Tax liability, then well and good. Else, you can get a salary statement from ur employer and then submit all investment proof to the IT department through a tax auditor.

Hi,since a normal regular employee does not get the benefit of 1000 rs, Will a account created on home maker's name and/or a earlier employee taken voluntary retirement who is not currently employed or in any EPF scheme eligible for this Rs.1000 from government?

1. In case of a retired person - Am not too sure how this scheme will be useful because the NPS itself is a pension scheme and is for people who are actively earning in their young age to save money for their retirement. So, how the scheme treats retired people who want to apply is not known yet2. A Home maker may not fall under the unorganized sector because she does not have an income. If the person is employed in a private company and is earning but does not have provident fund or any other retirement savings, then they will fall under the unorganized sector.

Hi My Sister age is 19 and she is unemployed. she want join this scheme.please tell me she will start this scheme or not.and if yes then fortunately she get the job and cut the PF in this case how to do?

Ashwini - If your sister gets a job that also has PF then she would become ineligible for this scheme and would have to close it. So, I would suggest you/your sister wait until she actually gets a job and enrol in this scheme in case they dont give PF

Hi Anand, I do private tuitions at home. Am I eligible for this scheme ? And I would like to have some clarification on the same. As I have heard that the minimum deposit is Rs. 100 per month in this scheme. That means the annual deposit amount will be Rs. 1200 from my side. So is government giving Rs. 1000 on top of this ? That means my annual savings will be Rs. 2200 at the end of first year ? Is my understanding right in this regard ? And how long will Govt. give this amount ? Like as I have heard for initial 3 years, is it correct ? If yes what interest will I get after 3 years ? Kindly reply.

Tanusri - Yes the 1000 rupees that the government gives will be on top of the Rs. 1200 that you deposit. However, this scheme was designed to motivate people to join NPS and was planned for 3 years which ends in March 2014. So, even if you join NPS now, you may not be eligible for the scheme.

You can check while opening your NPS account to check if the government has sent them a circular about the benefit continuing after March this year.

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